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What is Customer Lifetime Value and Why Does it Matter?

by Dan Linn on Mar 11, 2016 9:00:00 AM

Every business should be aware of customer lifetime value, how to calculate it, and how it can help with cash flow projections.  Essentially, the customer lifetime value, or CLV, is a prediction of all the value a business will derive from their entire relationship with a customer — namely, their net profit from that one customer.

The truth is that not all customers are created equal: of course you want as many new customers as possible, and you want the maximum number to come back and give you repeat business. Some customers will make more (and bigger) purchases than others. That's where CLV comes in: to try to identify which customers are most likely to stick around and provide continual revenue for your business, which will be recorded on your income statement forecast.

 

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Topics: Customer Lifetime Value